Borrowers Gaining Clout in the Loan Modification Process

It appears that distressed homeowners are finally becoming a priority as loan modification programs gain traction. Banks now seem willing to take proactive steps to stem the tide of foreclosures. The unfortunate truth is that only after intense government pressure have banks recently embraced the concept that modifying loans could be more beneficial than foreclosure. The result: a groundswell of activity encouraging delinquent or would-be delinquent borrowers to come to the table to discuss modifying their loans. But if borrowers cannot substantiate monthly income, or they simply don’t have sufficient income to satisfy any type of modified loan arrangement, the lender sees no benefit in pursuing a modification and a foreclosure becomes imminent.

Some distressed borrowers do have alternatives. For example, self-employed individuals or individuals with seasonal income who actually do earn enough annually to make a modified mortgage payment are just unable to produce a monthly pay stub. Compiling a comprehensive documentation package reflective of their complete financial picture can oftentimes make the difference between an approved modification and either a protracted negotiation with a lender or a downright “no” from the lender.

Some borrowers simply don’t have sufficient income to qualify for any type of modification. In these cases, direct negotiations with a lender will prove futile. The only option other than foreclosure is a short sale where an arrangement is made with the lender to sell the property to a third party at a price less than the mortgage note thereby satisfying the loan obligation. A strategic exit from a mortgage utilizing a short sale is quicker and less devastating than a slow march toward eviction by a foreclosing bank.

Homeowners – do your research. If you cannot afford your current mortgage, first ask yourself the hard question, do you have sufficient, substantiated income to realistically afford a plan to reduce your mortgage payment. You need to be prepared when you talk with your lender, and advocate for your best interests as your lender’s primary goal is not what’s best for you, it’s what’s best for them.

Remember, you don’t have to go it alone. There are companies that specialize in assisting distressed homeowners with loan modifications and short sales. You do have options.